Missouri Amendment 5: What "Eliminating the Income Tax" Really Means for Your Wallet

Looking at the pros and cons

01 July 2026

David M Robson

On August 4, 2026, Missouri voters will decide on Amendment 5 — a constitutional amendment that starts the process of phasing out the state's individual income tax. It sounds simple on the ballot. It is not simple in practice. As a tax preparer who has spent years helping Missouri families and business owners plan around state tax law, I think you deserve the full picture before you vote — not just the version on the yard signs.

We've Already Seen This Movie Once

Before we get to Amendment 5, it's worth knowing that Missouri's budget is already feeling the effects of a related tax cut passed in 2025. That year, Missouri became the first state in the country to eliminate its tax on capital gains — profits from selling stocks, real estate, and other investments — while keeping its regular income tax in place.

To be precise about that "first": other no-capital-gains states like Tennessee, Texas, and Florida got there by having no income tax at all. Missouri kept its regular income tax on wages and salaries but carved out a special exemption just for investment profits — making it the first state to tax paychecks while fully exempting capital gains.

At the time, the official fiscal note estimated the cost at about $160 million in the first year and $111 million a year after that. It didn't work out that way. The state's own budget director now says the real numbers are closer to $500 million in the first year and $360 million a year ongoing — roughly three times the original estimate. Independent analysts had actually flagged a bigger number before the vote; the state disputed it at the time and it turned out to be closer to the truth.

Who benefited most? More than two-thirds of the savings went to the top 1% of earners — households averaging $1.9 million or more a year. The average Missouri millionaire saved about $43,000. The average non-millionaire saved about $80.

I'm not bringing this up to relitigate a law that's already in effect. I'm bringing it up because it's a real, recent example of the exact pattern critics are warning about with Amendment 5: an official cost estimate that turned out to be well short of reality, on a tax cut that mostly helped people at the top. That's useful context for judging how much confidence to put in the numbers being used to sell the next one.

What Amendment 5 Actually Does

Amendment 5 doesn't cut your taxes on Election Day. It changes the Missouri Constitution to require lawmakers to phase out the individual income tax over time, based on revenue growth triggers, with a goal of hitting zero by 2032. It also gives the legislature new authority to expand or raise sales and use taxes — including on services that aren't taxed today — for five years without a separate statewide vote.

Here's the part that doesn't fit neatly on a bumper sticker: the amendment doesn't say how the lost revenue gets replaced. That decision gets made later, by the legislature, in a future session. A Missouri appeals court actually forced lawmakers to rewrite the ballot summary this spring because judges found it didn't clearly tell voters the measure both eliminates the income tax and suspends existing constitutional limits on new sales taxes. Even the state's own fiscal impact statement on the ballot admits the financial effect is "unknown" — because it depends entirely on legislation that hasn't been written yet.

That's not a conspiracy theory. That's the official record.

The Case For It

Supporters, including Governor Mike Kehoe, argue this is about modernizing an outdated tax code and making Missouri more competitive with no-income-tax neighbors like Tennessee. Their main points:

Keep more of what you earn. No state income tax means more take-home pay from day one for wage earners.
Attract jobs and investment. Supporters point to research showing states that phased out income taxes saw 16–19% more startup activity and average wage gains of around $4,000.
A code built for today's economy. Missouri's sales tax largely skips digital services, subscriptions, and online commerce. Expanding it there, supporters argue, captures growth the current system misses.
Guardrails exist. The phase-out is tied to revenue growth triggers, not an immediate cliff, and includes language meant to protect school funding.

The Case Against It — and Why It's the Part Getting Buried

Critics, including the nonpartisan Missouri Budget Project and the Missouri Association of Realtors, warn the "guardrails" framing hides the real math:

The hole is real and it's big. Missouri's income tax brings in about $8.5 billion a year — roughly 64% of the state's general revenue. There is no version of "expand the sales tax" that fills that hole without dramatically raising rates or taxing things that currently aren't taxed at all.
The sales tax rate would have to more than triple. To fully replace lost income tax revenue through rate increases alone, Missouri's state sales tax would need to climb from 3% to about 10.7%. Layer in local sales taxes, and some areas would approach 20% combined — among the highest in the country.
Most people would pay more, not less. By the Missouri Budget Project's estimate, roughly 80% of Missourians would see a net tax increase averaging over $500 a year, while the biggest savings go to the wealthiest households whose income tax bills are largest to begin with.
Schools and services are exposed. Sales tax revenue swings harder than income tax revenue during a recession — people stop buying things before they stop earning money. Critics warn this makes core funding (schools, public safety, services for seniors) less stable, not more.
Lawmakers get a five-year window with fewer checks. Normally, Missouri's Hancock Amendment requires voter approval for major tax increases. Amendment 5 would let the legislature raise and expand sales taxes for five years without that vote — a real shift in who controls the decision.
The plan everyone's debating isn't finished. Because the amendment sends implementation to a future legislature, nobody — including state officials — can currently tell you the actual dollar impact on your household. That's the biggest transparency gap here: you're being asked to vote yes or no on a framework, not a finished plan.

Side-by-Side

	Supporters say	Critics say
Budget impact	Revenue triggers protect fiscal capacity	Up to $8.5B structural hole with no guaranteed replacement
Competitiveness	Attracts businesses and residents from neighboring states	Sales tax up to ~20% could push shoppers across state lines
Your household	Bigger paycheck from day one	~80% of Missourians see a net tax increase, averaging $500+/year
Stability	Modernizes the tax base for digital/service commerce	Sales tax revenue is far more volatile in a downturn

Why I'm Writing This

I'm not telling you how to vote. I am telling you that "eliminate the income tax" is doing a lot of heavy lifting in this campaign's messaging, and the fine print — who actually pays more, how services get funded, and how much control voters give up in the process — deserves equal airtime. Whatever you decide on August 4, decide with the whole picture in front of you, not just the headline.

If you want to dig into the primary sources yourself:

Have questions about how this could affect your specific tax situation? That's exactly what I'm here for — reach out any time.

David M Robson